Building things that customers want is essential for the success of any business. However, 90% of startups fail so unfortunately many companies have learned the hard way that it’s not an easy task.
So why do so many companies fail to build things customers want?
Here are some reasons:
- Companies may have started with a clear understanding of who their target customer is, but over time they lose touch. This can happen by adding adjacent use cases and customer segments without a clear strategy. Building things customers want requires talking to them to understand their problems and having creativity/insight into how to solve them. When companies lose touch, they often make the mistake of looking at what their competitors are doing or following macro trends instead of talking to customers. For example, Jawbone initially achieved significant success by selling the Jambox bluetooth speaker. However, they later made a strategic decision to enter the healthcare wearable market in order to compete with Fitbit. Unfortunately, this shift towards wearables proved to be detrimental to Jawbone’s success. Fitbit, on the other hand, had exclusively concentrated on developing wearable devices and emerged as the dominant player in the wearables market. As a result, Jawbone ultimately faced its downfall while Fitbit secured a strong position in the industry.
- They’re under pressure from investors to ship quickly. Building things customers want takes time and requires multiple iterations based on customer feedback. However, investors often have short-term goals and want to see results quickly. This can lead companies to cut corners and ship products that haven’t been adequately validated with customers. For example, Color secured a $15 million investment in their series A funding round to develop a photo sharing app that aimed to cater to a wide audience. The significant funding attracted substantial media attention and resulted in a large number of app downloads. However, the initial version of the app was lacking, leading to a high rate of user churn and negative ratings. Unfortunately, Color couldn’t bounce back from this setback and failed to meet the expectations set by its substantial valuation. After attempting several unsuccessful pivots, they ultimately had to shut down the app.
- Assuming they know what customers want. This is perhaps the most dangerous reason of all. Companies may believe they know what’s best for their customers, or they may become enamored with building new and shiny objects that don’t solve customer problems. However, this can lead to products that nobody wants. For example, Steve Ballmer, CEO of Microsoft, famously dismissed the iPhone because it didn’t have a keyboard.
So how can companies build things customers want?
Here are some steps:
- Clearly define your target customer, core use case, and market (see XYZ essay for more details about how to do this). Talk to your target customers to understand their problems and creatively solve them. Conduct user surveys, interviews, and other research methods to gain insights into what your customers really want.
- Build and ship quickly, but measure to validate whether you are building something your target customers want. Use customer feedback to iterate and pivot until you get it right. A good way to think about this is Henrik Kniberg’s framework where if you want to build a car, start with a skateboard so you can get feedback on the use case of traveling while you’re building the car rather than waiting for a big bang delivery of the car much later. What’s your skateboard?
- Make sure you have enough time and runway to adapt and pivot based on customer feedback. Ideally you are profitable and control your own destiny. Rob Walling’s stair step method is a really great way to ensure you have time and runway.